From the Sector

• Strategic collaboration in a prominent location on Orchard Road
• TENCEL™ Studio will host showroom featuring fashion from TENCEL™ fibers
• Cooperation underpins new branding strategy to reach out to consumers
• Chain of innovation and application centers in Asia completed

Lenzing/Singapore – The Lenzing Group, world market leader in specialty fibers from wood, will partner with the Textile and Fashion Federation Singapore (TaFF) to offer Singapore’s designers a hub to present themselves and make the TENCEL™ brand more accessible to consumers. The collaboration was announced last week at the opening ceremony of Design Orchard attended by Chan Chun Sing, Minister for Trade and Industry of Singapore.

“Lenzing is excited to work with TaFF on The Cocoon Space and its programs. Our cooperation with fashion designers is an important element in showcasing the sustainability promise of our flagship brand TENCEL™ to consumers. It comprises an integral part of Lenzing’s commitment to green-up the fashion industry”, says Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “Singapore is a strategic hub for Lenzing in Asia, and we are proud to contribute towards taking Singapore’s fashion scene to greater heights.”

CHOMARAT, the specialist in composite & construction reinforcements and coated fabrics, has demonstrated the Group’s determination to pursue a sustainable process by earning environmental management (ISO 14001) and energy management (ISO 50001) certification for its French sites. “By obtaining both ISO 14001 and ISO 50001 certification, CHOMARAT now has a tested and standardized framework for developing an effective, sustainable environmental and energy management strategy,” says CHOMARAT Environment and Energy Manager Laurent VÉRITÉ.

Minimizing environmental impacts & optimizing energy use
ISO 50001 certification is validation of efficient energy management, with the bonus of lower energy consumption and the tools needed to address a warming climate. ISO 14001 certification is based on standards and requirements, and it constitutes an international benchmark for environmental management systems. “CHOMARAT is committed to a responsible and sustainable process for all of its activities in France. With ISO 14001 certification, the Group is incorporating environmental requirements into its management and production systems,” explains CHOMARAT France CEO Raphaël LAURENT.

Pursuing a long-term strategy
This twofold certification is in keeping with CHOMARAT’s long-term vision. “Our strategy is implemented through new investments and international development. But the Group is also actively involved in sustainable development and a sustainable innovation initiative,” explains Raphaël LAURENT. Measures that have been implemented include reducing the noise level, preventing pollution risks and improving waste management. Fluorescent lighting has been replaced by LEDs; new, more energy-efficient equipment has been installed; and the heating and air-conditioning ductwork has been insulated to reduce fuel-oil consumption.
“It is thanks to the combined efforts of all CHOMARAT’s teams that we were able to obtain these two certifications. For us, this is our first milestone towards a sustainable economy,” concludes Laurent VÉRITÉ.

Decline in revenue due to lower prices for standard viscose, less favorable currencies and lower production volume

• Pressure on prices for key raw materials remains high
• Positive impact due to focus on specialty fibers and further optimization of the product mix
• Expansion project in Mobile temporarily mothballed
• Acquisition of the remaining 30 percent of Lenzing (Nanjing) Fibers Co. Ltd.

The Lenzing Group recorded a solid business development in the first three quarters of 2018. The decline in revenue and earnings compared with the same period of the previous year was essentially based on a mix of lower prices for standard viscose, more unfavorable exchange rates and price increases for key raw materials. The Lenzing Group’s strategic orientation with a focus on specialty fibers had a positive impact in this environment.

Revenue decreased by 5.2 percent to EUR 1,636.2 mn over the comparative period of the previous year. Apart from the high starting base, this was primarily attributable to the expected challenging market environment for standard viscose, less favorable exchange rates and lower production volume. EBITDA (earnings before interest, tax, depreciation and amortization) recorded a decline by 26.8 percent to EUR 290.6 mn due to price increases for key raw materials and higher energy and dissolving wood pulp prices. The EBITDA margin dropped from 23 percent in the first three quarters of the previous year to 17.8 percent. EBIT (earnings before interest and tax) fell by 36.2 percent to EUR 190.3 mn, leading to a lower EBIT margin of 11.6 percent (01-09/2017: 17.3 percent). Net profit for the period dropped by 39 percent from EUR 219.3 mn in the previous year to EUR 133.8 mn. Earnings per share equaled EUR 5.06 (01-09/2017: EUR 8.12).

“The Lenzing Group is currently operating in a challenging environment. Against this background, we are satisfied with the solid business development and the corporate strategy sCore TEN has a positive impact. The new production line in Heiligenkreuz started up successfully and customers’ feedback has been positive,” says Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “While many viscose producers are faced with a very tense profit situation, we are well positioned due to our specialty strategy and still expect a satisfactory full year”, Doboczky adds.

Key strategic measures were implemented during the first three quarters of 2018 in line with the sCore TEN strategy. The start-up of new capacities for lyocell fibers in Heiligenkreuz, the production start of LENZING™ ECOVERO™ fibers at the Nanjing site and the investment in another pilot line for TENCEL™ Luxe filaments are important steps to accomplish the goal of increasing the share of specialty fibers in total revenue.

Project in Mobile temporarily mothballed
Due to the decision to temporarily mothball the lyocell expansion project in Mobile, Alabama (USA), in view of the buoyant US labor market and trade tensions between the major trading blocks, the implementation of the expansion plan for specialty staple fibers will be slowed down. The Lenzing Group will put all its effort to readjust the execution of its growth plan to meet strong market demand for its lyocell fibers. This includes an increased focus on the lyocell expansion project in Prachinburi (Thailand).

Advancing forward solutions
Regarding the capacity expansion for specialty products such as TENCEL™ Luxe filaments and LENZING™ ECOVERO™ viscose fibers, Lenzing is still on track. After the introduction of TENCEL™ Luxe branded lyocell filament yarns in the previous year, Lenzing continues to drive innovations in the area of the value chain. In September, the company also announced the successful development of the LENZING™ Web Technology, a new technology platform focusing on sustainable nonwoven products, which will lead to new market opportunities for the industry. Following several years of research and development work and investments totaling EUR 26 mn, the pilot plant at the headquarters in Lenzing has been successfully put into operation.

Largest dissolving wood pulp line worldwide
At the end of June, the Lenzing Group and Duratex, the largest producer of industrialized wood panels of the southern hemisphere, announced that they had agreed on the terms and conditions to form a joint venture to investigate building the largest single line dissolving wood pulp plant in the state of Minas Gerais (Brazil). This decision supports the self-supply with dissolving wood pulp and the growth in specialty fibers. The joint venture is investigating the construction of a 450,000 t dissolving wood pulp plant, which is expected to become the largest and most competitive single line dissolving wood pulp plant in the world. The final investment decisionto build the dissolving wood pulp plant is subject to the outcome of the basic engineering studies and the approval by the respective supervisory boards.

Acquisition of Chinese operation
At the beginning of November the takeover by the Lenzing Group of the remaining 30 percent of its Chinese subsidiary Lenzing (Nanjing) Fibers Co. Ltd. (LNF) from its state-owned joint venture partner NCFC was completed. After closing of the transaction, the Lenzing Group will hold 100 percent of LNF. The acquisition will have a negative impact on net profit of approx. EUR 21 mn for the fiscal year 2018. The purchase of the shares supports Lenzing’s strategic growth as a producer of specialty fibers from the renewable raw material wood in China and worldwide. It paves the way to setting up further production lines for specialty fibers. Lenzing wants to convert LNF into a specialty fibers hub over time.

Expansion of capacities
CAPEX (investments in intangible assets and property, plant and equipment) rose by 35.5 percent year-on-year to EUR 174.1 mn in the first three quarters of 2018. This is primarily attributable to capacity expansions in Heiligenkreuz and the expansion of the existing dissolving wood pulp plant in Lenzing as well as the investments made so far in Mobile.

Outlook
Demand development on the global fiber market remains positive. Lenzing expects wood-based cellulosic fibers to continue to grow at a higher rate than the overall fiber market. In a challenging market environment the Lenzing Group expects solid results for 2018, albeit lower than in the outstanding last two years.

For 2019, Lenzing expects standard viscose markets to remain under pressure because of an ongoing oversupply and very high raw material prices. Lenzing’s specialty fiber business is expected to continue the very positive development.

The above-mentioned development reassures the Lenzing Group in its chosen corporate strategy sCore TEN. Lenzing is very well positioned in this market environment and will continue its consistent focus on growth with specialty fibers.

Ted Baker, the global lifestyle brand, announces that on October 4th 2018 it entered into a Global product licensing agreement with Timex Group (“Timex”). The new agreement will allow Ted Baker to underpin its own global plans with a unique product offering in watches that fully compliments its apparel and accessory collections.

Commenting, Ray Kelvin CBE, Founder and Chief Executive of Ted Baker, said:
“This is an exciting opportunity for Ted Baker to drive accelerated growth in our watch business by leveraging the Timex Group global footprint and infrastructure, in line with our strategy to further develop Ted Baker as a global lifestyle brand.”

Commenting, Tobias Reiss Schmidt, President and Chief Executive Officer of Timex Group, said:
“We are delighted to bring Timex Groups expertise and long history as an authentic watchmaker to Ted Baker and look forward to producing exciting and innovative timepieces for their consumers”. Timex Group will launch the collections Internationally through premium retail partners and its global distributor network in summer 2019.

• Italian expertise, research and green innovation.
• METALBOTTONI ups the stakes with one-of-a-kind interpretations, to enhance its market presence.

At Première Vision Accessories (Paris, 19-21 September) the company presents the new collection VÀNITA, a mix of leatherwear and sportswear, based on Made in Italy craft, with an increasingly wide and coordinated range.

Based on product experience, combining new trends in accessories. The METALBOTTONI strategy is enriched with product novelties which aim at exploring new existing market segments. A strategy which increasingly leads great artisan production skills to meet constant research and expansion of the range, with the world of sportswear becoming more and more pivotal; without forgetting the important sustainable innovations of the NO IMPACT protocol.

No Impact becomes “Committed Accessories”

The guideline for restyling the METALBOTTONI range over the past two years has been the recent implementation of the NO IMPACT corporate sustainability protocol, which has just acquired a new “dress”, associated with the following pay-off: “Committed Accessories”. It is a way of underscoring the constant green development of the company over the past few years, in terms of process and product: use of recycled raw materials, development of finishing without chemicals, implementation of processes which today have allowed to reduce electricity and water consumption to almost zero.

Moreover the range of NO IMPACT proposals for this season has expanded to include not only new metal finishing but also leather label completely made from processing scrap, thus establishing Metalbottoni as “partner for branding elements” also in terms of sustainability. Pure Made in Italy and constant expansion of collections towards sportswear The great skill in metal processing, which for sixty years now has characterised the top-of-the-range quality of METALBOTTONI products, is now combined with constant research work conducted by our in-house Style Office, resulting in new collections which are more and more in line with the trends emerging from major trade fairs. Maintaining a presence on strong markets (central Europe, Northern Europe and United States), increasing the depth of segments and intercepting new ones. This is the main goal also chosen for the Première Vision Accessories Exhibition where, alongside the autumn-winter 2019/2020 collections, there will be a preview of VÀNITA, the new collection dedicated to leatherwear and more.

METALBOTTONI is proving to be one of the most dynamic companies in the accessory industry.

Over the past two years, in fact, it has introduced numerous product and process innovations, aiming at increasing its range especially as regards sportswear accessories. This trend was driven by a substantial increase in demand by read-to-wear and luxury brands in the past two seasons, and today it means new proposals which account for 35% of the range for METALBOTTONI. New collections have been presented in the past two seasons expressly dedicated to the sportswear world, namely GRAVITA, the first line designed by the company for pressure buttons, and MÀRYA, the new beachwear collection. Also the line called LABORA, the classic collection of accessories for fashion and ready-to-wear has been constantly enhanced with proposals combining style and technical performance. This mix of fashion and sport elements is increasingly evident in the company’s product range, for example in the combination of different materials, using metal with nylon or other resins to create new and unique accessories.

Vànita: beyond leatherwear, a world of accessories

The meeting between fashion, luxury and sportswear has produced VÀNITA, the brand new collection which presents a new approach to accessories dedicated to leatherwear, from an allround perspective from luxury to sportswear. Developed starting from solid product research by the company’s in-house Style Office, VÀNITA is a true meeting of styles and elements, a combination of high product standards with unique elegance. This line introduces one-of-a-kind visions for accessories, exploring highly original pathways dedicated to the world of leather. The VÀNITA proposal ranges from accessories for leatherwear and small leatherwear, to those for shoes, bags and the sportswear worlds. There are two main lines within this collection: one is expressly designed for the world of luxury, the other has a more technical and sporty approach. A true mix between artisan metal processing, based on the great METALBOTTONI expertise in this sector, and “ingredients” such as nylon, rubber finishes or innovative 3D processing, which are often combined together.

“Our goal is to offer an increasingly comprehensive range which allows us to explore new segments on the markets where we are present” - says Gregorio Valli, CEO and President of METALBOTTONI S.P.A – “a ‘recipe’ which should be able to integrate our unmatched product expertise with a constant expansion of our range and continuous implementation of our pathway towards corporate responsibility and sustainability”.

• Decline in revenue due to volatile standard viscose prices and currencies
• Prices for key raw materials still high
• New production line in Heiligenkreuz in start-up phase
• Backward integration into dissolving wood pulp to be strengthened via joint venture in Brazil

Lenzing – The Lenzing Group generated solid results in a challenging market environment in the first half of 2018. The decline in revenue and earnings compared with the first half of the previous year, which was the best half-year in the company’s history, was based on a mix of volatile prices for standard viscose and price increases for key raw materials, coupled with currency effects. The Lenzing Group’s strategic orientation with a focus on specialty fibers had a positive impact in this environment and is increasingly bearing fruit. The corporate strategy sCore TEN is being implemented with great discipline in order to expand the company’s offering of specialty fibers and even more extensively support customers and business partners.

Revenue declined by 6.4 percent compared with the first half of the previous year to EUR 1,075.4 mn. This decrease is primarily attributable to less favorable currency exchange rates. EBITDA (earnings before interest, tax, depreciation and amortization) decreased by 28.1 percent to EUR 194.8 mn, especially due to price increases for key raw materials and higher energy prices. The EBITDA margin fell from 23.6 percent in the first half of 2017 to 18.1 percent in the first half of 2018. EBIT (earnings before interest and tax) declined by 37 percent to EUR 128.7 mn, leading to a lower EBIT margin of 12 percent (H1 2017: 17.8 percent). The net profit for the period dropped by 39.3 percent from EUR 150.3 mn in the previous year to EUR 91.3 mn. Earnings per share equaled EUR 3.44 (H1 2017: EUR 5.55).

“So far, the financial year 2018 proved to be as challenging as expected, and market headwinds were clearly noticeable. In this market environment, we are satisfied with the solid results we report. We are proud that with our corporate strategy sCore TEN and the focus on growth with specialty fibers we show big steps in the right direction. The recently announced joint venture with Duratex is another important step in executing this corporate strategy,” says Stefan Doboczky, Chief Executive Officer of the Lenzing Group. “We will continue to implement our strategy with great discipline and are convinced that this will steadily improve the long-term profitability of Lenzing,” Doboczky adds.

Largest dissolving wood pulp line worldwide

In June, the Lenzing Group and Duratex, the largest producer of industrialized wood panels of the southern hemisphere, announced that they had agreed on the terms and conditions to form a joint venture to investigate building the largest dissolving wood pulp plant (single line concept) in the state of Minas Gerais, (Brazil). This decision supports the self-supply with dissolving wood pulp and the growth in specialty fibers, defined in Lenzing’s sCore TEN strategy. The joint venture will investigate the construction of a 450,000 t dissolving wood pulp plant, which is expected to become the largest and most competitive single line dissolving wood pulp plant in the world. The final investment decision to build the dissolving wood pulp plant is subject to the outcome of the basic engineering studies and the approval by the respective supervisory boards.

Even stronger focus on sustainable products

As a pioneer in sustainable fiber solutions, the Lenzing Group is committed to higher standards in the textile and nonwoven sectors. More than EUR 100 mn will be invested in sustainable manufacturing technologies and production facilities by 2022 in order to realize this vision. In line with the Group’s specialty strategy, another two milestones were set in the first half of 2018: Lenzing announced an investment of up to EUR 30 mn in another pilot line for the production of TENCEL™ Luxe filaments at the Lenzing site. In addition, the company also introduced the environmentally friendly process for the production of LENZING™ ECOVERO™ branded viscose fibers at its Chinese site. Both decisions contribute to better meeting the strong demand for environmentally compatible products.

Expansion of capacities

CAPEX (investments in intangible assets and property, plant and equipment) rose by 60.8 percent year-on-year to EUR 117.2 mn in the first half of 2018. This is primarily attributable to the capacity expansions in Heiligenkreuz (Austria) and Mobile, Alabama (USA) and the expansion of the existing dissolving wood pulp plant in Lenzing. The company is pressing ahead with these projects as well as with planning work on the construction of the next state-of-the-art lyocell production facility in Prachinburi (Thailand).

New brand identity

With the new positioning of its master brand and its product brands, the Lenzing Group started a new phase of branding and brand communication in the first half of 2018. Lenzing decided to carry out a new brand strategy in order to sharpen its company and product profile as a sustainable innovation leader for customers and partners along the value chain as well as for consumers. The most important pillar of this new brand strategy is a brand architecture with a focus on fewer brands and a strong message to consumers. With the TENCEL™ brand as an umbrella brand for all specialty products in the textile segment and the VEOCEL™ brand as the umbrella brand for all specialty fibers in the nonwoven segment as well as the new master brand, which was presented in March, Lenzing showcases its strengths in a targeted manner.

Outlook

The International Monetary Fund expects a further acceleration in global economic growth to 3.9 percent for 2018. However, growing protectionist tendencies in the political arena represent a source of uncertainty. Export-oriented companies in the Eurozone are faced with additional challenges from the currency environment.

Developments on the fiber markets should remain positive, but with continuing volatility. The rising demand for cotton should support prices despite the increase in production. Polyester fiber prices have stabilized after the increase in previous years.

The wood-based cellulosic fiber segment, which is relevant for Lenzing, should see further strong demand. After years of moderate capacity expansion in the viscose sector, significant additional volumes will enter the market in 2018 and 2019. As a result, standard viscose prices will remain under pressure. The Lenzing Group is very well positioned in this market environment with its corporate strategy sCore TEN and will continue its consistent focus on growth with specialty fibers.

The Lenzing Group still sees challenging market conditions for the second half of 2018. In addition to the price pressure on standard viscose, the prices of some key raw materials such as caustic soda are still at a very high level and exchange rates continue to be volatile. Our specialty fibers are expected to continue their very positive development. In this context, the Lenzing Group is satisfied with the earnings development to date, but underlines its estimate that the results for the year 2018 will be lower than the outstanding results in the last two years.

The Perlon Group is making great strides on its journey towards the future and is therefore vigorously implementing the measures required to achieve its aim. This aim (known internally as ‘strategy 2020’) provides for the next level of globalisation and the sustainable growth of the market leader in the production of synthetic filaments. Through the extensive relocation of existing; and the generation of additional production capacity, the requirements have been accomplished and will thus directly serve increasing demand in the main volume markets. Part of this strategy, is the integration of one of the four German sites into the remaining three, this will then strengthen those sites and support the expansion of the factories in the USA and China.

The key to this success is a highly qualified and motivated personnel, engaged and focussed project staff and lastly but by no means least, loyal customers all of whom welcome this future direction and support us, their longstanding business partner. Important milestones are being reached with minimum disruption to the daily business in spite of a continuingly healthy order book

Important Milestones have so far been

• Implementing the newly built finished goods warehouse and a production line for PMC-Monofil at Hahl Inc, the production site in Lexington, SC
• Completing the building of the production hall with integrated admin building and starting to fit out the interior of the new production site in Haining, China. This is on schedule for the fixed opening date of 29 November 2018.
• Implementing an additional production line for PMC-Monofil into the Munderkingen site in Germany. Furthermore the planning for the transfer of an additional production line has also been finalised.
• Completion of the plant layout in the Industrial park in Bobingen (Germany) to allow for the transfer of several production lines from their current homes in Dormagen and Recytec in Munderkingen (Perlon’s recycling business).

With the help of a tailwind from the targets achieved thus far, Florian Kisling (Perlon CEO) and his team are looking forward with optimism to the additional transformation and the finalisation of this mammoth ground breaking project. They are already thinking ahead to the subsequent project ‘2020+’.

As society becomes increasingly digital while cyber threats are multiplying, trust is immensely precious to everyone, not only to consumers but also to companies and organizations whose business relies on digitalization. This highlights the importance of a versatile and trusted partner that focuses on cybersecurity.

Reflecting Nixu’s purpose, “we keep the digital society running", Nixu growth strategy focuses particularly on cybersecurity services for digital business transformation. Developing and delivering comprehensive cybersecurity services that enable clients to utilize, in a safe manner, the opportunities provided by the Industrial Internet of Things and Digital Identities is a key priority for Nixu.
Today, Nixu reached an important milestone and transferred to the Official List of Nasdaq Helsinki stock exchange and continues on its journey to become the number one choice as a cybersecurity partner for digitalization and the best workplace for cybersecurity professionals.

“When we first got listed on Nasdaq First North in 2014 we were quite small Finnish consultancy, in less than four years we have succeeded in transforming to an international cybersecurity services company and multiplied our size”, said Petri Kairinen, CEO of Nixu. “This is still only the beginning, as the demand for cybersecurity services raises exponentially. The listing on the Official List will enable us to reach further international growth funding which will help us uphold the fast growth speed. Of course, our global enterprise clients will also appreciate the transparency and quality associated with being a listed company.“

JD.com, Inc., China’s leading technology-driven e-commerce company, and Google, announced today that Google will invest $550 million in cash in JD.com as part of a strategic partnership.

Google and JD plan to collaborate on a range of strategic initiatives, including joint development of retail solutions in a range of regions around the world, including Southeast Asia, the U.S. and Europe. By applying JD’s supply chain and logistics expertise and Google’s technology strengths, the two companies aim to explore the creation of next generation retail infrastructure solutions, with the goal of offering helpful, personalized and frictionless shopping experiences. JD also plans to make a selection of high-quality products available for sale through Google Shopping in multiple regions.

“This partnership with Google opens up a broad range of possibilities to offer a superior retail experience to consumers throughout the world,” said JD.com’s Chief Strategy Officer Jianwen Liao. “This marks an important step in the process of modernizing global retail. As we celebrate our June 18 anniversary sale, this partnership opens a new chapter in our history.”

"We are excited to partner with JD.com and explore new solutions for retail ecosystems around the world to enable helpful, personalized and frictionless shopping experiences that give consumers the power to shop wherever and however they want,” said Google Chief Business Officer Philipp Schindler.

Under the agreements, Google will receive 27,106,948 newly issued JD.com Class A ordinary shares at an issue price of $20.29 per share, equivalent to $40.58 per ADS, based on the volume-weighted average trading price over the prior 10 trading days.

•    Revenue down 6.1 percent to EUR 550.3 mn primarily due to currency effects
•    EBITDA decline of 24.8 percent to EUR 101.6 mn mainly due to softening prices for commodity viscose and increasing costs for key raw materials
•    Company is intensively pushing ahead with expansion of production capacities for specialty fibers
•    Strong message to consumers – new master brand and new product brands presented

Lenzing – The Lenzing Group started the 2018 financial year with solid business results. Revenue and earnings decreased compared to the first quarter of the previous year against the backdrop of a challenging market environment for standard viscose combined with changes in currency exchange rates. The corporate strategy sCore TEN is being implemented with great discipline in order to expand the company’s offering of specialty fibers and even more extensively support customers and business partners.

For more information see Attachment.